Industry Profile:Chris Tsakalakis

 By Larry LeBlanc

The U.S. secondary ticket market is a volatile, $4 billion-per-year marketplace in which resellers and primary ticketers continually and heatedly square off.

No doubt, for example, paperless ticketing, primarily developed by Ticketmaster Entertainment to curb the secondary market, will be the hot-button topic at Ticket Summit 2010 in New York Jan. 13-15th.

StubHub, launched in 2000, is the undisputed leader in the secondary ticketing market. The company's online marketplace enables fans to buy and sell tickets to concert, sports, theatrical and other live entertainment events. The firm’s partners include nearly 60 sports teams, and it is aligned with media companies AOL, and ESPN.

In 2009, StubHub had a 65% increase in ticket volume for concerts.

Despite the continued recession, gross concert ticket sales grew 40% on StubHub, while fans saw a 16% price decrease on the average ticket--from $159 in 2008 down to $133.

Most secondary market sites like StubHub make money by charging buyers and sellers a fee, rather than participating in profits themselves—the money above face value goes to the person who sells the ticket.

Decades ago, StubHub would have been illegal in many states. The growth of online ticket sales, and the rise of consumer trading sites like eBay and Craigslist by the early 2000s, were factors that led to changes in state scalping laws (largely limited to street sales) across the country.

The market then developed at a rapid pace as consumers began looking on secondary ticket sites more and more after being locked out from buying good seats at primary sites, or finding exorbitant prices there, sought other sources for tickets.

In 2007, eBay significantly raised the stakes in the secondary ticketing business by acquiring StubHub for $310 million. A year later, Ticketmaster bought TicketsNow for about $265 million in cash.

Chris Tsakalakis, president of StubHub and GM of eBay Tickets, led eBay's acquisition of StubHub.

With a Bachelors of Science in Economics from the Wharton School of the University of Pennsylvania, Tsakalakis started his career in E-commerce in 1996.

He had been an eBay Marketplaces executive since 2003. Prior to joining eBay Tickets, Tsakalakis managed the Advanced Solutions Group which provides solutions for advanced buyers and sellers, and includes eBay Stores, ProStores, Trading Platforms, Seller Marketing and Tools, the eBay Developers program and Shipping.

Tsakalakis also oversaw the launch of ProStores, an eBay company offering Web storefront solutions independent of eBay.com.

Prior to joining eBay, Tsakalakis was a managing partner at Trefo, a consulting firm focused on high-technology startup companies. Prior to Trefo, he held management positions at two E-commerce startups, and was a consultant with Bain & Company, the global business and strategy consulting firm, for six years.

Ticketmaster’s new paperless ticketing system requires purchasers of some selected seats to show a valid ID, and the credit card they used to buy the ticket. The idea is to make sure that the ticket is used by the person who bought them.

Last year, Tom Waits became the first touring artist to use Ticketmaster’s paperless technology during his 13-date U.S. theater tour.

The Verizon Arena in Little Rock, Arkansas was the first venue to permanently install Ticketmaster's paperless ticketing technology. The MTS Centre in Winnipeg, Manitoba followed.

When utilizing paperless ticketing, fans do not receive a physical concert ticket for their entry into the event. On the day of the event, they are required to bring the credit card they used for the ticket purchase and their photo ID to the concert. All members of the ticket purchaser's party must be present at the same time to enter the venue. The venue's ticket usher then swipes their credit card upon entry, and presents each person in the party with seat locator slips for access into the show.

Ticketmaster argues that paperless ticketing is an effective method to limit ticket resale and better provides fans with access to tickets at the original face price set by the artist, team and/or promoter.

Ticketmaster's stance against automated "bots" that strive to circumvent its system and "jump to the front of the line" is well documented.

The breaking point was Miley Cyrus/Hannah Montana Best of Both Worlds tour that grossed $55 million, and sold about 1 million tickets to about 70 shows. According to reports, it was the top resold ticket of 2007, garnering an average ticket price of more than $250 on many resale sites.

The 2009 North American leg of Cyrus's sell-out Wonder World tour shut out resellers. It was 100% paperless, with an average ticket price of $68.

During the Best of Both Worlds tour, there were claims that secondary vendors had scooped up tickets, and sold them at massive markups. StubHub and others, however, maintain the number of tickets sold by resellers was overstated.

Ticketmaster may have conceived the paperless technology to thwart ticket reselling but its implementation comes as some artists have finally found ways to tap the pockets of fans willing to buy a ticket for more than face value.

Time and time again artists have seen tickets to their shows being sold in the secondary market for $300-$400. They have learned that there are fans willing to pay whatever the market will bear to be at a concert.

Not surprisingly, many artists, managers and agents think pricing and distribution should be an artist’s decision and that artists deserve at least part of that resell revenue.

Many industry figures quietly acknowledge that a sizable portion of seats that are held back-- from corporate sponsors or from the artists themselves-- end up on secondary sales sites.

Holding back concert tickets from public on sale to feed the secondary market is frowned upon in the music industry—at least publicly—but, at the same time, presale, premium, and VIP tickets as well as ticket auctions are becoming more commonplace today.

Tsakalakis contends that that paperless ticketing takes away fans' rights and it will allow the primary ticketing company to become monopolists by eliminating competition.

What are the restrictions of paperless ticketing that are not being talked about?

To date, most of the discussion about paperless has been about the convenience of it. We don’t dispute the fact that it might be more convenient for some people to have a credit card, not worry about tickets, and get (tickets) that way.

There’s no dispute with that.

Our main issues are that (paperless ticketing) takes away fan rights, and takes away fan choice. It takes away the right to gift, give away the ticket or to resell that ticket. It’s a fundamental fan right, we feel, when they buy a ticket that it is their ticket. That has been taken away by paperless.

It also takes away the choice a fan can have to sell (a ticket) if a resale is even allowed. In cases, where a resale is allowed, they can only do it with (Ticketmaster).That limits choice. With limited choices, you usually get worse service, and higher prices.

Who owns the ticket? Is it the artist, the venue, the promoter or the fan? Isn’t that the issue?

I think so. What we have seen in our research is that the vast majority of fans feel that once they buy a ticket it is theirs to do what they wish. To keep it, to give it to a friend, to re-sell it, or to use it. Once the artist, the venue or the team sells the ticket, it is the fan’s property. The vast majority of fans that we have surveyed say, “This is my ticket. I can do with it what I wish.”

Don’t resellers provide an air of expectation around many events?

Yes, I agree. The resale market provides value in two ways. One way is that if the people who buy a ticket know they can resell it, there’s a greater demand for the tickets in the on sale. Secondly, with a resale market out there, and a public one like the marketplace that we manage, you get to see what the real market demand is for a set of tickets or for a particular show.

Decades ago, there’d be one local promoter; tickets went on sale; and fans, who saw a newspaper ad, went down to the ticket office, and purchased tickets. Today, there are a lot of distractions for consumers.

Absolutely. The benefit that we bring as StubHub, as an open marketplace, is transparency. These are the total amount of tickets available for sale from our sellers who are selling them on our site; here are the prices; and here is where you can sit—the section and the row—and you make your choice.

It is more in line with the way that consumers shop today as opposed to the old style where tickets went on sale on a Saturday, and you marked that on your calendar. If you knew that date, and got in early enough, you were able to get tickets. That’s not how life works these days, but that’s how primary ticketing works.

This is a time many sectors of the business seem to be trying to find ways to collect money from those fans willing to buy a ticket for more than face value.

There is this sense that “I should get all of the money.” I the artist. I the (primary) ticket company. I should get all of that money. Someone else is making money on something; I should get all of that money. It is a curious way of looking at the market. If I bought a Ford Taurus, and if I wanted to resell it, and the restriction was that I couldn’t resell it, or I could only sell it back to the dealer who could do the reselling, people would be up in arms. They would be saying, “This is ridiculous. This is a restraint of trade.”

But, yet, you have artists that say, “If you are going to do anything with that ticket that happens to be to my event—despite the fact that you paid your hard cold cash for it, and you own that ticket—I have to tell you how you can handle that ticket. Whether or not you can resell it; at what price you can resell it; on which platform you can resell it.” It completely and utterly ridiculous.

Promoter Seth Hurwitz told me last year that too many people are interested in other peoples’ money in our business today.

I agree. That’s an excellent statement. But the idea of artists’ holds and artists or promoters selling tickets that the artist may or may not know about at a higher than face value price has been there for a long time in the music business.

[Last year in his “In The Hot Seat” profile, Washington, DC-based promoter Seth Hurwitz of I.M.P. Productions expressed a similar overview of the self-interests within the industry while still slamming ticket resellers.

Said Hurwitz, “Re-selling tickets is illegal in some states. It should be made illegal everywhere or a cap should be put on the resale. That would get rid of this problem. But people in our business just cannot stop counting other peoples’ money. (With secondary ticketing) people have been watching other people making money off of their product. Managers seeing scalpers making money off of their artists and think, “I need a piece of that.” Of course, the agent representing the manager and the act has to get their piece. People saw these scalpers making further money on their shows and thought, “If there’s further money to be made, where’s my piece?” That’s where everybody got into trouble.

“I have always felt that it is hard enough to sell the ticket once. That’s all I need to do. I didn’t care who else would sell tickets. I do care now because (secondary ticketing firms) have developed ways of getting bulk tickets quickly and they are taking inventory away from the public. They have taken an important part of the concert-going experience away from the public. The excitement of buying a ticket, they have taken that away. I think that’s wrong. I think it’s killing the business.”]

Today, there’s considerable anger directed toward the ticketing market in general over the mark up on tickets as well as such practices as presale, premium, VIP, auctions, etc.

Absolutely. One of the issues people have is that there is a lack of transparency in the primary market. It seems at best, disingenuous; and, at worst, dishonest when you say all of the tickets are going to be made available on this date, and only 12% are made available. When you ask why tickets sold so fast, the answer is because of brokers using automated "bots" when that’s not the case.

There’s anger when people are told the price of the ticket is $50, and the convenience fees on top of that are 30%, which is sort of the average. There’s a lot of things like that consumers don’t like, and don’t understand. (Primary ticket sellers) don’t tell you up front, “Hey, if you think you are going to get tickets in the 100 level section, think again because all of those tickets have already been sold.”

The ticketing industry, especially for concerts, is a funny business, relative to other businesses that sell things. I have been in E-commerce for 13 years so I know a little bit of what I’m talking about. Ticketing is a very curious and funny business. The price is the price for most other (businesses). You know what you are getting. If something sells out, then it sells out.

The average fan has absolutely no idea that, in reality, they are (often) trying to buy (from) a much smaller group of tickets than they think is available. The (primary ticket) industry says, “Well, it’s not our fault. We have all of these brokers using (automated) ‘bots.’” Where, in reality, the public never had a large supply of tickets to go after in the first place.

Usually, manufacturers try to price products in a way that they don’t sell out. So they can then increase the price to meet the demand. That’s what artists are doing with premium ticketing.

I have no problem with artists selling premium tickets or anything else. I do have a problem where they reselling those tickets at a premium but they are doing it sort of through the back door so they don’t get a PR hit. Not only are they selling them through the back door, but they are also telling people, “Look at the scalper market, and how outrageous these prices are” when they are the ones contributing to it in some cases.

StubHub is the largest marketplace for the resale of tickets.

We track our share of traffic going through all of the online secondary sites including Ticket Exchange. For the first 9 months of 2009, we had about a 26% (market share) according to comScore (the internet marketing research company providing marketing data and services to many of the Internet's largest businesses).

The average concert ticket price on StubHub went down in 2009.

It’s a free marketplace. We still had people who wanted to see an event, but they weren’t willing to spend as much.

Obviously, the recession has had an impact

Oh yeah. Both with supply and demand. Supply increased above and beyond the increase in our transactions. You had buyers who were pickier about price. As a result, you saw the (overall) price come down. The price decreases that we saw in 2009 in concerts was of 16% while, in the overall North American concert market, prices were about flat. (The overall total) went up, maybe, a few percentage points.

Still, there was a 65% increase in ticket volume in your market.

That’s right. But only a 40% increase in growth because of the 16% drop in price. Market pricing drove the market in a much bigger way than the rest of the (ticket) market grew.

Technology lowered the barrier in the ticket market, in general; while social media has been one of the key influencers.

It is an influencer but social media is a way for people to find out about an event. So it is great from a promotion and marketing standpoint but social media hasn’t made the Saturday 10 o’clock on sale any better--which is what you’d expect in this day and age.

Are Twitter and Facebook impacting on your business with fans offering tickets for sale?

I haven’t seen a lot of individuals marketing tickets on Twitter. Most of the postings about concerts are “If you are interested, I am selling my tickets on StubHub.” Facebook is similar.

If the merger of Live Nation and Ticketmaster Entertainment goes through, will there be an impact on your business?

That remains to be seen. I’m not sure that it will. The main concern is around what happens when you have this increased market power (with the merger) that can be used to force paperless ticketing.

Any other concerns?

There’s a benefit to having multiple ticketing companies out there, multiple people you can work with. The Madonna deal that we did was with Live Nation. We have a decent relationship with Live Nation. In general, what has happened with the merger is that discussions with either company (Live Nation or TicketMaster), and with the rest of the industry, ground to a halt for most of 2009.

In recent years, the Department of Justice has challenged few proposed mergers.

Right. But the last couple of years were under the Bush administration. We’ll see what happens. I honesty don’t know what will happen. My impression is that (Department of Justice) is doing a very through review. It’s been 11 months now (since the merger was announced).

Ticketmaster's stance against secondary ticketing firms that circumvent their system is well documented. How much of their stance is about missing the boat in the secondary market, and then crying foul?

Ticketmaster entered the secondary market in 2002 with TicketExchange which, from my understanding, was a reaction to the threat that StubHub posed. StubHub launched in 2000. It is curious to me because (Ticketmaster) is still in the secondary market, and I don’t criticize them for them being there. What I don’t understand is the negative attitude, and the press releases against scalping that they come out with when they are still in the secondary market. They have TicketsNow, and TicketExchange which is a secondary marketplace. They also offer premium tickets. The definition of TicketExchange isn’t 100% clear to me anymore.

Its purchase of TicketsNow seems to have been a headache for Ticketmaster. There may not be a direct conflict of interest, but there’s a perceived conflict of interest that has been hurtful to them as a corporate entity.

I think that’s a fair assessment. The beauty of StubHub and eBay, as marketplaces for tickets, is that it's all that we are. We don’t hold inventory. Our sellers determine the price. Our sellers put the tickets on the site. We don’t have some other access to the tickets through primary means because we are not a primary ticket agency.

After a scandal in Feb., 2009 when Bruce Springsteen fans were directed to TicketsNow while face-value tickets were still available, a bill was proposed in Congress by Rep. William Pascrell Jr., (Dem. New Jersey) that would create 48-hour waiting periods before tickets could be resold. Senator Charles E. Schumer, (Dem. New York) indicated the same in a press release. There’s also talk of registering ticket brokers

I don’t see any issue with that. I don’t think most brokers have an issue with that. Most brokers are already licensed as businesses. The thing you have to bear in mind is that reselling a ticket at face value or below face value is legal in the United States for all 50 states, and reselling a ticket at face value or above is legal in 45 of the 50 states.

There’s this general perception that reselling a ticket is illegal.

No, it’s not. Maybe it was when people were growing up or, maybe, they see street scalpers. There are (still) restrictions of people reselling on the street within a certain distance of the venue.

A restriction of 48 hour waiting period doesn’t sound like a bad idea.

I don’t fully understand what the purpose of that is. There should be disclosure that tickets are still available for sale in the primary (market) or haven’t yet been made available for sale in the primary (market) or in any marketplace that re-sells tickets, I’m more than happy to implement that. We want full disclosure to our customers.

I don’t know exactly how the (Rep. William Pascrell Jr.) legislation is worded but some of it (deals with) 48 hours after the general published on sale (date). However, in reality, the first sale of those tickets may have been to American Express card holders or fan clubs in a pre-sale. Those nuances don’t always get built into to these types of bills.

In 2008, StubHub, along with Viagogo in Europe, were designated by Live Nation, as official resellers for Madonna’s tour dates. That was a first.

We had a deal where Madonna essentially marketed our marketplace, and let her fans know about it as an additional opportunity for them to find tickets to her events. I think that part of (the Live Nation decision) was the realization that the resale market for tickets exists. We all know it exists, and it has existed for a long time. The realization is that not everybody can get the tickets that they want through the public on sale for a variety of reasons and, if there’s going to be a reseller in the marketplace, than she can let her fans know about that while she can benefit from that marketing.

You obviously paid Madonna for that marketing privilege. Was it a big enough payday for her to agree to do this deal? If not, why do it?

It goes back to (re-selling tickets)-- it is going to happen anyway. It was more that if fans wanted to buy tickets through the secondary market, StubHub was the place to go for that. In return for giving us that endorsement, she got some money from us. Relative to the size of the tour, it was pretty small..

With the Miley Cyrus/Hannah Montana Best of Both Worlds tour, secondary sellers were accused of price gouging.

Yes. That’s a very interesting case. What is not clear, and what I heard and I don’t know exactly for sure, is there was a lot of activity in the secondary marketing place that was due to a lot of demand relative to the supply of tickets. The secondary (ticketing) marketplace got vilified and ticket sellers and "bots" got vilified for the cause of why all of these tickets sold out without anyone one the primary side explaining just how many of those tickets were made available to the general public.

Less than 1% of the tickets for the tour went through StubHub?

Oh, yeah. It was a very small percentage. Certainly in the single digit percentages.

What was the appeal to eBay in acquiring StubHub for a reported $310 million,? Synergies? Or that StubHub was under-performing and its value could be quickly boosted?

Well, the appeal to eBay was that StubHub was over performing. That they were growing more quickly than the overall market. The company was doing phenomenally well. As John Donahoe (president and CEO, eBay Inc.) put it when we did the acquisition, the main draw of StubHub was that it is a better customer experience all the way around. Better experience on the website. Higher levels of customer satisfaction; and very much an eBay-like marketplace--just one focused solely on the resale of tickets.

What percentage of StubHub's business is on the entertainment side versus sports.

The majority of our business is in sports, and it’s a very healthy business. A decent chunk of our business is in concerts. It’s in the minority; not a majority.

Over the years there have been some problems with StubHub’s sports ticketing, including with the Yankees.

The problems of the past have almost entirely gone away in baseball with our partnership with major league baseball at majorleaguebaseball.com and, certainly, throughout most of the sports teams. The Yankees are one of 25 teams or so where we have a marketing partnership in addition to this league deal. They are a great partner to work with.

With the league deal we have electronic integration with the primary ticketing systems. So when a season ticket holder wants to sell their ticket they can sell that ticket wherever they want or give it away. But, if they log into their season ticket website they have the option to sell that ticket on StubHub.

When they do so, we automatically pull the information of ticket location. When a buyer buys that ticket, they get it delivered to them instantly, electronically, on our website. We then tell the primary ticket system that the ticket is sold. They cancel the bar code for the original ticket, and issue a new bar code for the seat that shows up on our web site. The buyer gets the ticket instantly on our website. It cuts down on a lot of issues that buyers have in other parts of our business where they say, “Where’s my ticket?” while waiting for their Fed-Ex (ticket delivery).

All the seller has to do is to list the ticket, and they are done?

If the ticket sells, they don’t have to do anything else. They wait for their payment either by check or PayPal.

You have been doing E-commerce since the mid-90s. What was its appeal to you early on?

I have a lot of passion around E-commerce, and the Internet in general. The appeal to me was that E-commerce made peoples’ lives better. I know that sounds corny, but it was the idea that you could provide a service through the internet and connect people in a way that would take more time and effort to do off line. Not only was it hugely efficient and kind of cool from a technology standpoint, but it made people’s lives easier and created opportunities for things to happen in a way that you just couldn’t do through a local retailer.

It provides choices.

Absolutely. Access to a worldwide inventory in an easy way. That is certainly what eBay provides, and certainly what we feel StubHub provides also.

How did you get involved with E-commerce?

In 1995, I stopped working on my consulting job, and I started soul-searching bout what I wanted to do. I decided I wanted to work in the Internet industry. That’s when things were booming. I was living in London at the time. I said to people that I wanted to work with the Internet. The response I got more than once (from people) was, “Hmm, the internet. That’s cool. I need to check that out.” For people who did understand something about the Internet, the response was, “Is there any way to make money on the Internet?” It was pretty early days.

How did you end up in London?

After I graduated, I worked at Bain & Company doing strategic consulting in Boston. After three years, I got the bug to work overseas. I had friends who had left Bain in 1992 to go to work in Poland in privatization work. I thought that was cool and glamorous. So I started looking at jobs in Warsaw to do privatization work. My boss said, “Why don’t you just transfer?” We had an office in Warsaw. Then they gave me an offer to go to either Moscow or the London office. I wanted adventure, but not as much adventure as Moscow. So I went to London.

Part of the deal (of going to London) was being able to get onto a project outside of the UK. There was a project in Warsaw that I got assigned to for three months. It was a blast. Then, when I got back from Warsaw, I got sent to the Moscow office for Bain in 1993 for 11 months. At the age of 26, I was managing 10 people, all Russian. Most of them were bilingual, except two lawyers who spoke no English. I spoke no Russian. It was a blast.

Quite a background for the ticketing business.

Yeah. I have sometimes used the analogy that the Russian Mafia reminds me of elements of the music business where they see money in somebody else’s pocket, and they want to go after it.

Larry LeBlanc was the Canadian bureau chief of Billboard from 1991-2007 and Canadian editor of Record World from 1970-89. He was also a co-founder of the late Canadian music trade, The Record. He has been quoted on music industry issues in hundreds of publications including Time, Forbes, the London Times and the New York Times.

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